Job cuts? Restructures? What 2025 will bring the public service

Saturday, 18 January 2025

The streets of Wellington CBD are beginning to bubble back to normality - the bus stops are packed at 5pm, every inch of Midland Park crammed on a sunny lunch time, and job listings are starting to open up.

But what does 2025 have in store for the public service, and what will it mean for those who keep the cogs turning?

When the Government opened the books at the end of last year, revealing a worse economic picture than expected, Finance Minister Nicola Willis confirmed there would be a programme of targeted savings.

“We have not made decisions on those yet,” she said in December. “We have asked ministers to put forward options, and we are actively engaged in that budget process.”

There was also a spending cap on “the vast majority of government departments, excluding important ones, such as health, education, the police”. Willis signalled more job cuts could be on the table.

IPANZ (Institute of Public Administration New Zealand) president Liz MacPherson was hopeful for a more strategic approach in configuring the public service this year - deeper dives into prioritising during what is almost certain to be a tight year.

“We basically want to say, are we looking in the right places?

“Our view is that the way that the public service cuts have been implemented is not ideal. We haven't seen a strategic approach that essentially says, ‘here are some areas that we prioritise, this is what we want to prioritise, here some areas that aren't so important to us anymore’.

“What it's been more about is low hanging fruit, so we've seen across-the-board cuts and what has tended to happen in government departments, not surprisingly given the speed with which the savings were required, was chief executives, leaders, have chosen to take vacancies that happen to exist, and those vacancies will not necessarily be in areas where it would be make strategic sense to cut.”

MacPherson was concerned that “we probably already have, and we may continue to lose, deep expertise… the sort of expertise that is so critical to help ministers actually craft and deliver on sustainable change”.

“It may well be that in 2025 there is a realisation that actually there are roles that have been cut that actually need to be filled in order to deliver on what the Government needs to do.

“There's been a lot of focus on the front line, and I don't disagree with that focus, but the front line is actually very deep, [and] that for you to have a really effective frontline delivery of services, you need to actually have the capability and capacity sitting in behind to support that delivery.

“My hope is that 2025 is the year where we actually try and look for [a] more strategic focus on where we take those savings and where we need to build the capability.”

MacPherson said a pillar for 2025 was based on the electoral cycle: “Year two is traditionally the year where governments really focus in on getting things done, particularly if it's a new government.”

“Chief executives are likely to be to not only be working with zero based budgets, but to be potentially asked to find more savings. It's going to pose a real challenge for the leaders of the public sector to think about how they work with their ministers to ensure that the funds they have available to them are actually going to those areas that will really help provide sustainable change, to support ministers to do the things that they need to do.

“In 2024 we saw a lot of activity that was basically undoing things and stopping things. 2025 is about making a mark, and good public servants will be asking ministers, ‘what do you want to achieve? What actually do you want to get done?’

“2025 is going to be even busier than 2024 and actually, really achieving things in 2025 for ministers, where they want to make steep changes, make sustainable changes, that relationship with public service is going to be really important.”

Asked if the prospect of a fiscally restrained, bleaker 2025 public service was a surprise, Infometrics CE Brad Olsen said no.

“We've been of the opinion, since the change in government, that actually it would be a continual thing. This was never going to be one set of cuts then done, it was going to be continual reprioritisations and spending and government cutbacks and changes for the next couple of years.”

Olsen said the feeling was clear the Government wanted to have a greater efficiency drive when it comes to the public service: “Where are they currently spending money? What are they getting for that money. And can they get more bang for buck?”

The likelihood of zero budgets could see ministries operating under the notion of, new projects needing new money would need to find savings elsewhere, said Olsen.

“The challenge that comes through… in my mind, it would be more appropriate for government to say, ‘look, here are our priority areas, and those areas we know we're going to need more resource in them, or at least the same amount of resource, to do all of the hard work we want.’”

That could, to a degree, look like going into deeper detail of the public service targets.

Olsen said there was more optimism in the general economy, “but there's still some very tough choices for the Government going forward, and that means that there will be further changes, there'll be further reprioritisations, there'll be further savings made.

“And that does mean that, we don't expect that if you've still got a job at the moment, that that is absolutely safe, because there are further changes to come.”

MacPherson said she had public servants ask, particularly those who had not been through a public service reset with a new government, what the shape of the public service would look like in the future and whether “things will actually settle down”.

“We have seen these things happen before. This one feels a bit larger than in the past. But you know, the change is not quite as drastic from a spending perspective.”

MacPherson was hopeful the social investment approach would focus on strategic investment for the long term.

“Where does the Government want to actually deliver? What outcomes is it after? And in making sure that the scalpel is actually a surgical and a strategic one, rather than simply an across-the-board haircut.”

Alpha Recruitment and The Johnson Group general manager Jane Reddiex has been working in recruitment for government and private sector in the Wellington region for 25 years.

“I've never seen anything as as bad as 2024 was. It's the longevity of the downturn and also the severity of it.”

Although Reddiex was unsure if it would continue, there was a feeling the job market was improving.

“Auckland doesn't seem to be have been hit quite as badly. But… the type of work that we do in Auckland is quite different to what we do in Wellington.

“We've seen a bit of a downturn up there, but we haven't noticed the almost complete slowdown we've seen in in Wellington over 2024 - we've been basically experiencing this for about 15 months.”

It seemed to have become not unusual for people newly recruited into roles in the public service in Wellington to be ‘over qualified’ for the role. She said the issue was that over experienced employee would be unlikely to stick around if the market picked up.

“The problem with that situation is… if a really, really experienced policy person who's been working as principal or manager, or even at DCE [deputy chief executive] level in central government, if they go out into another area and the market comes back, that person is not going to stick.”

Will the contractor market, which reached lucrative levels in Wellington, ever come back? “It will come back to a degree, but I don't think it will ever come back the way that it was.”

The relationship between ministers and public servants was critical to get the government’s work plan done, MacPherson said.